A Complete Guide to Skill-Based Hiring: Importance and Strategy

By Shafaque Ansari Last updated Mar 15, 2023

A Complete Guide to Skill-Based Hiring: Importance and Strategy

Skills-based recruiting is a new HR buzzword. Does this imply that skill-based hiring will permanently alter how we recruit candidates? Are there any measurable advantages for firms and employees? Let’s find out in this article.

What is Skill-Based Hiring?

Skills-based hiring is a type of talent acquisition that focuses on recruiting workers based on their skill set rather than their educational accomplishments or previous employment. Organizations look for transferrable talents or the candidate’s capacity to develop them in the job rather than the number of letters after their name to define the ideal candidate.

Although this sort of recruiting necessitates a shift in HR mentality and practice, it results in a larger talent pool for filling unfilled positions.

Importance of Skills-Based Hiring

Recent employment shifts have made it increasingly difficult for businesses to locate skilled workers that satisfy all of their standards. Companies may use skills-based recruiting to go past degrees and prejudices and focus on objective assessments of applicants.

Larger Talent Pools

According to 41% of questioned HR managers, entry-level roles are among the most difficult to fill since candidates frequently lack four-year college degrees or suitable work experience.

Companies are putting themselves in a bind by mandating four-year degrees. In actuality, new college graduates want more pay to repay their school costs and investments while performing at the same level as their counterparts without college degrees.

As a result, it makes sense to reject the traditional linear hiring method in favor of broadening the talent pool with a matched skill set and high reskilling and upskilling potential.

Higher Potential To Discover Diverse Candidates

Regrettably, qualified candidates are frequently rejected based on traditional criteria such as experience or education. Discrimination based on history and society is prevalent in many sections of the country. While some individuals may have the necessary skills, they have never been given a fair chance. Skill-based hiring allows this underserved population to thrive.

Skills-based hiring also assists organizations in attracting a more varied, inclusive workforce, such as veterans or persons with impairments. For example, 62% of Americans over the age of 25 do not have a college diploma. Including this condition in your job advertisement turns off a significant number of minorities, and vice versa. You may unlock these doors by focusing on talents rather than degrees.

Reduced Time to Hire

The average time-to-hire in Germany is 70 days, according to HRForecast statistics. One of the reasons companies can’t fill positions quickly is that they examine abilities at the end of screening interviews. As a result, they miss out on a large pool of applicants by focusing on college degrees and years of experience rather than genuine capabilities.

As a result, it makes sense for businesses to technically reduce their entry hurdle by first allowing applicants without formal education degrees and lineage. This method allows firms to tap into a larger talent pool and fill openings more quickly.

Reduced Costs to Hire

A bachelor’s or master’s degree does not guarantee that candidates have received adequate skills-based education and competencies to do the job. Employers may save money on training and employee onboarding in the long run by addressing the skills now.

Higher Retention Rates

According to LinkedIn data, applicants who do not have a four-year college degree stay with organizations 34% longer than their colleagues who do. The candidate’s participation and willingness to give back are two variables that contribute to improved retention rates.

What Encourages the Needed Transition to Skill-Based Hiring?

Accenture and Harvard Business School published research in 2017 that indicated that hiring managers in all industries perceive a college degree as a form of blanket qualification—essentially a proxy for both technical and emotional qualities. The degree is the minimal requirement that job candidates must meet before being evaluated. This is an issue, especially in today’s competitive job market when demand far outstrips supply.

Restricting your field of candidates to those with a specific college degree removes prospective high-performers who:

They may not have access to expensive higher-education opportunities.
Having gained in-demand talents in unconventional ways
They haven’t tailored their resumes to meet applicant tracking system requirements.

Luckily, the HR sector as a whole is shifting toward a more skills-based hiring strategy. According to an SHRM study, 79 percent of employers believe that skill evaluations are as significant as or more important than other recruiting criteria, and respondents indicated a readiness to accept individuals who do not have a college degree or the required years of experience.

Another issue with the more conventional recruiting technique is that skill evaluation is frequently pushed to the end of the employment process. Companies hire applicants that satisfy certain criteria, such as having a bachelor’s degree or a particular number of years of experience in a similar field. The hiring manager may then analyze the candidate’s competence after the first few rounds of interviews. Yet, by that point, the shortlist may be lacking applicants with the competencies required for success in the post.

Skills-Based Hiring vs Degree-Based Hiring

The idea behind skills-based recruiting is simple. It’s a recruiting strategy that places more emphasis on a candidate’s performance and practical abilities than on their official qualifications.

In the past, HR managers would concentrate on matching an applicant to a job profile. Candidates would be sorted based on prerequisites such as educational credentials, ancestry, personal recommendations, and other workplace needs. The candidates who checked off the most boxes ultimately advanced to the interview round and received an offer.

The COVID-19 epidemic provided some context. For instance, 73% of domestic workers in the US saw unfavorable effects in May 2020, such as reduced hours or a total loss of employment. Not just domestic employees were neglected; other types of labor were as well. According to the International Labor Organization (ILO), more than 140 million people are expected to lose their jobs as a result of the epidemic.

As a result, the pandemic became a watershed moment in employee upskilling and reskilling. LinkedIn developed the Career Explorer feature in 2020 to assist laid-off people in locating prospective career transitions based on their abilities. The tool mapped available applicant abilities and identified additional skills candidates may learn to change careers.

Workers and employers failed to recognize their upskilling potential. Food workers are excellent examples of workers with significant upskilling potential. Waiters, hostesses, and other food sector personnel displayed up to 71% of the same abilities as customer service specialists.

Both employers and potential employees benefit from this arrangement. Employers, for example, may swiftly fill positions while saving money on training and onboarding. Workers, in turn, might smoothly transition to other roles while maintaining their salaries.

It is the essence of competency-based hiring. This method focuses on recruiting people based on their actual competence rather than their previous occupations, work experience, or track records.

Is this the beginning of the end of degree-based hiring? Not at all. Several career jobs still demand official certifications, school degrees, and extensive experience. As a result, skill-based hiring is an ideal method for low- and middle-skill occupations.

Strategies to Adopt Skilled-Based Hiring

Moving to a skills-based hiring approach will require some upfront work since the jobs you’re trying to fill must be appraised based on the abilities they require for success. This includes developing skill-based job descriptions and emphasizing verified talents during the hiring process.

Nonetheless, the end result will be well worth the work and will save your company time and money on rehiring for jobs that were not a good match. And the clear advantage is that you’ll be bringing on new talent that is more likely to thrive in the position.

Here are five ideas to help you get started with a skills-based hiring strategy:

1. Make digital credentials your go-to resource

Digital credentials are rapid, verifiable, and simplify the screening process. Instead of searching professional networking sites for keywords, use a skills-based recruitment method and simply filter individuals based on the verified credentials you anticipate a potential employee to possess.

2. Rewrite your job descriptions

Job descriptions are the first step in the hiring process. HR professionals advise changing job descriptions to assist candidates in focusing on their merits, abilities, and skills.

As per LinkedIn, job descriptions that emphasize responsibilities rather than formal criteria receive 14% more CVs per view. As a result, replace the “Requirements” block with “Responsibilities” to show the real responsibilities that a candidate will encounter on the job.

Concentrate on the outcomes you wish to see while specifying your needs. Include quantifiable KPIs for a job role, for example, or actionable results you desire from candidates.

3. Start small and build momentum

It is not necessary to remodel the entire recruitment process at once. Instead, choose the job with the highest turnover and begin there. If transitioning to a skills-based approach increases retention, you may use that as a business case to top management for expanding the program company-wide.

4. Employ the assistance of managers and top performers

Use your best performers’ and supervisors’ experience to get the task done right. It is your responsibility as an HR expert to collect their feedback and interpret it into a skills language that applicants understand. Turning the intellectual property into actionable information is an excellent way to improve overall organizational performance.

5. Make use of an AI-powered hiring tool

Machine Learning and AI-powered recruiting technologies are transforming recruitment and applicant sourcing, making it simpler and faster to locate qualified candidates for available positions. Simply ensure that the instrument you employ is in accordance with industry norms and fulfills AI transparency criteria.

Closing Thought

If you wish to shift from degree-based to skills-based hiring, consider all of the advantages and downsides. In general, skill-based hiring is ideal for entry-level and middle-skill occupations that do not require four-year college degrees and practical experience.

Overall, it’s an excellent hiring strategy that prioritizes individuals and their practical competence. It has been established that skills-based recruiting enhances workplace diversity while also lowering HR expenditures for training and onboarding.

[To share your insights with us, please write to sghosh@martechseries.com]